/ 9 September 2012

EU pushes more moves to stem debt crisis

EU competition commissioner Joaquin Almunia
EU competition commissioner Joaquin Almunia


Monti said he had proposed an EU summit in Rome to discuss the rise of anti-European populism, divisions between north and south and nationalistic prejudices that have been fostered by resentment against austerity measures.

"Old stereotypes and old tensions have re-emerged," Monti said. "There are many manifestations of populism that are aimed at disunity in nearly all the member states," he told journalists at an economic conference in northern Italy.

Monti's remarks at a joint news conference with European Council president Herman van Rompuy underlined the urgency of overcoming a crisis that has lasted close to three years.

Van Rompuy said he supported Monti's idea and favoured bringing forward a meeting to foster European integration from its originally scheduled date in late 2014.

Michel Barnier, the EU commissioner in charge of financial regulation, called in a Reuters interview at the conference for swift joint oversight of all eurozone banks.

Eurozone-wide banking supervision should be introduced by next January, despite German reservations, he said.

That provided a new focal point in the crisis fighting two days after the European Central Bank announced a plan to buy bonds of weak member states to push down their borrowing costs.

EU economic affairs commissioner Olli Rehn told Reuters the conditions underpinning the ECB plan would be based on existing recommendations for countries like Spain and Italy.

Speaking on the sidelines of the same conference on the shores of Lake Como, Rehn appeared to be backing remarks by ECB executive board member Benoit Coeure who said countries applying for bond buying help might not have to make extra budget cuts.

The idea of the programme was not to "pile more austerity on top of austerity" Couere told France Inter radio, addressing a major concern in Spain and Italy where belt-tightening programmes have aggravated deep recessions.

Centralised bank supervision

Barnier said the EU Commission's banking sector plan envisaged centralised supervision for all 6 000 eurozone lenders, though oversight of some day-to-day matters such as consumer protection would remain with national authorities.

"We know that all banks can cause problems. For this reason the logic of our proposals and the requests from the eurozone heads of state is to have a credible oversight of each bank in the eurozone," Barnier said at the gathering of business leaders, politicians and EU officials.

"Germany voiced concerns we can understand. They are the largest [financial] contributor," he said, but hoped Berlin would support the plan as it favoured sound banking oversight.

EU finance ministers are meeting in Cyprus next week to discuss centralised banking supervision. German Finance Minister Wolfgang Schaeuble has said the ECB should only supervise big banks, and expressed doubts the EU can put in place such a mechanism by the January 2013 deadline.

But Barnier said on Saturday creating such supervision in just over a year was "necessary and do-able".

ECB president Mario Draghi unveiled plans on Thursday for potentially unlimited purchases of bonds with maturities of up to three years issued by countries that request European aid and fulfil strict domestic policy conditions.

Rehn said the conditions for aid would be based on existing country-specific recommendations and "would have to include very specific objectives and a timeline" on meeting them.

No countries have yet applied for help from the yield reduction plan, he said.

Italian Economy Minister Vittorio Grilli told reporters at the Cernobbio conference that Italy did not plan to sign up, while Spain has said it would discuss conditions attached to the ECB programme next week with its eurozone partners but was in no hurry to seek international aid.

Monti also said Italy did not need to seek help, but told CNBC television it would not be "a drama" if the country had to do so one day.

Grilli said Italy was on the right road to mending its debt-laden, stagnating economy but was not "satisfied" yet.

There are concerns inside and outside Italy that a new government to be elected in polls next spring could try to renege on some of the painful debt-cutting reforms imposed by Monti's technocrat government.

Aware of the risk amid increasing public opposition to the economic pain, Monti's ministers are trying to lock Italy into those changes so that backsliding will be difficult.

Mainstream parties, particularly the weakened People of Liberty (PDL) grouping of former prime minister Silvio Berlusconi, are under heavy attack from the rising Five Star Movement, a populist group led by comedian Beppe Grillo.

He is also a trenchant critic of Monti. – Reuters